Silver: Prices Ready to Breakout?

The place to put our money in 2009 will probably be in silver, gold and oil. I don't see any of them disappointing over the year. Already oil has a super contango going, with guaranteed profits built in with little or no risk.

Silver and gold are almost ensured the same thing, as the US dollar starts its inevitable collapse and decline, and investors rush to safety in the two metals.

Silver and gold futures, along with ETFs should also perform strongly, as the deleveraging and forced liquidation periods of investment funds and companies seems to be winding down. That's why we see money flowing to this precious metals.

It's also the reason the dollar will continue to drop for some time, as the artificial circumstances that allowed it to remain temporarily strong are now gone with the forced liquidation and deleveraging period, and so nothing stands in the way of silver futures and gold futures moving up in price.

Another reason 2009 looks good, is energy costs are down, which play a big part in the cost of mining silver, which with the timing of the economic conditions, is nothing but favorable for silver in 2009.

While there's no doubt that gold futures and prices will flourish in 2009, reaching heady numbers, in terms percentages percentages, silver futures will probably even outproduce gold futures as an investment, and bring some very good returns themselves.

One thing to consider with the pricing of silver is there are two components involved, just like their is with platinum, as they're both significant industrial metals as well as investment metals.

That means much may depend on how investors view silver as to how high it will go. If they look at it strictly from an industrial demand point of view, it may not rise as high as expected, because demand for industrial silver could definitely fall this year.

But view it primarily from as an investment metal, and silver will shine in 2009, as silver futures soar to dizzying heights.

One last thing about silver futures prices soaring this year, is they're denominated in U.S. dollars, while most silver mining companies are foreign, and not working from the dollar. That means that locally, prices are falling while the metal prices are soaring. What could be better than that for silver investors everywhere?

Well, those in America have the pesky problem of a currency falling in value, so exchange rates could hurt them depending on how things are structured and the silver company they've invested in, if that's how they went about doing it.

Either way, silver futures and investment in some silver mining companies and ETFs, should be one of the few solid investments available to those looking to not only salvage their money, but have it work for them too.

A few commodities will be hot this year, and silver will be one of them.

iShares Silver Trust Bullion Increases by 30.69 Tons on December 26

iShares Silver Trust (SLV) increased its physical bullion holdings by 30.69 tons on December 26, the highest level since the latter part of October.

The iShares Silver Trust fund is the largest ETF backed by silver in the world. They now have a total of 6,792.99 tons of bullion on hand, against the 6,762.3 tons they had on December 24.

Since the early part of December, silver tonnage held by the trust is up 1.5 percent or 106.24 tons.

What Happens if Silver and Gold Price Ratio Returns to Historic Pattern?

It's an understatement to say gold and silver have been struggling lately, as the two metals continue to plunge, along with the worldwide economies.

What is fascinating about silver in particular, is the current ratio that is completely out of sync with its historic levels with gold.

The historical average ratio between the prices of gold and silver has been silver holding close to a 1/20 price of gold. At this time it is sitting at only a 1/75th price in relationship to gold's price.

What silver investors need to ask themselves is what happens if the price ratio between silver and gold reverts back to historic norms.

We can be sure some of that will come from the continual fall of the price of gold, but I don't think we can assume that in and of itself will bring back the ratio. I think we'll start to see the rise of silver prices again, and when that happens, there will be an abundance of opportunities to play the metal.

Once the forced liguidation of commodities unwinds itself, it's at that time we should look seriously at a surge in silver prices, which should drive up the prices of good silver mining companies ... and others as well.

The bottom line is we need to keep a close eye on the ratio of prices between silver and gold. They are far too out of sync at this time to remain there. When it changes, we need a plan in place to swoop in and profit from it.